Iran deal & mega IPOs

Overnight, the US and Iran announced an agreement to end the war, with formal signing expected later this week in Switzerland. Details remain limited, but the key points appear to be an immediate halt to military operations and the reopening of the Strait of Hormuz. While Iran would reaffirm that it would not procure or develop nuclear weapons, the details of the nuclear programme would be addressed in later negotiations. Markets have already begun to respond positively, with equities moving higher and oil prices easing. 

This development is particularly relevant in the current inflation backdrop. If lower energy prices persist, they could ease some of the renewed upward pressure on inflation, which has re-emerged as a central concern for policymakers. In the US, inflation came in higher-than-expected last week, rising from 3.8% to 4.2% year-on-year. This supports the view that inflation remains persistent in an environment of resilient demand and previously elevated energy costs. 

In Europe, these dynamics have already translated into policy change, with the European Central Bank increasing the key policy rate by 25 basis points to 2.25%. The move reflects concerns that price pressures may prove stickier than previously anticipated, even as growth shows signs of moderation. 

Against this backdrop, attention turns to the Federal Reserve (Fed) meeting on 17 June, the first under Kevin Warsh’s leadership. Markets are likely to focus less on the policy decision itself (investors expect no change to the key policy rate) and more on the broader policy stance and communication style. While Warsh has emphasised central bank independence, his earlier remarks suggest a willingness to reassess existing policy frameworks. The key question is whether the Fed maintains a cautious, data-dependent approach or signals a firmer response to inflation risks. Our base case remains one of measured policy, with flexibility to act if inflation pressures persist. 

Elsewhere, the Bank of England (BoE) is expected to remain cautiously hawkish. While early signs of labour market cooling are emerging, inflation remains above target, pointing to a gradual and delayed easing cycle. In Japan, the Bank of Japan (BoJ) continues to pursue a cautious normalisation path, balancing above-target inflation with ongoing growth uncertainties. 

Overall, while the geopolitical backdrop appears to be stabilising, central bank messaging remains unchanged. Policy is likely to stay restrictive for longer than previously expected, reinforcing the ‘higher for longer’ rates environment shaping markets. 

A new wave of large, innovation-led companies is preparing to enter public markets. High-profile names such as SpaceX, which began trading last Friday, as well as OpenAI and Anthropic, could together represent more than USD 3tn to 4tn in market capitalisation. This would make it one of the most significant IPO cycles in decades and a major test of market liquidity. 

These companies are aligned with structural themes such as artificial intelligence, connectivity and space infrastructure, which helps explain strong investor interest. However, the central issue for markets is not demand, but absorption. When several large growth stories come to market at the same time, capital typically needs to be reallocated, often at the expense of existing holdings. 

This means the current IPO wave can be viewed as more than a simple pipeline of new listings. It represents a broader test of how efficiently public markets can absorb large-scale capital needs in sectors where expectations are already elevated. 

A key characteristic of this wave is its purpose. These IPOs are primarily capital raising events, designed to finance substantial investment programmes, particularly in AI and computing infrastructure. Unlike traditional IPOs, they are not mainly exit opportunities. Investors are being asked to fund future growth while accepting structurally high capital requirements. 

SpaceX illustrates this dynamic clearly. Its vertically integrated model offers strategic appeal, but an unprecedented valuation, estimated at more than 90 times sales, underlines how heavily the investment case depends on future execution. Similar considerations apply to OpenAI and Anthropic, where strong growth narratives are accompanied by high capital intensity and, in some cases, significant cash burn. 

Taken together, these IPOs offer scale and long-term potential, but also introduce meaningful risks. Valuation discipline is likely to be critical. The main risk is not a lack of interest, but the possibility of de-rating if expectations prove too optimistic. 

While geopolitical developments, notably the announcement of an Iran deal, are dominating headlines and the world is waiting for Friday’s signing in Switzerland to get further clarity on the scope and durability of the agreement, market attention is shifting towards central banks. 

Inflation releases in Japan, the UK and the Eurozone will provide additional context, particularly around underlying price pressures. However, these data points are unlikely to move markets significantly in isolation. 

The main focus will be on policy decisions from the Fed, BoE and the BoJ. All three institutions appear to be on a tightening path. The Bank of Japan may act in the near term, while the Fed and the Bank of England are more likely to take a cautious stance, potentially signalling further action later in the year. 

Ultimately, beyond the decisions themselves, communication is likely to be key. Even modest shifts in tone or guidance could influence rate expectations and broader market dynamics.